TIDMNCCL
RNS Number : 8542Q
Ncondezi Energy Limited
23 October 2019
News Release
Investment in Off Grid Solar Battery Project and Working Capital
Facility
23 October 2019: Ncondezi Energy Limited ("Ncondezi" or the
"Company") (AIM: NCCL) is pleased to announce that it has:
-- entered into a Subscription Agreement and a Shareholders'
Agreement with GridX Africa Development ("GridX") and GridX Africa
AssetCo ("GridX SPV") to finance the development of a 400 kWp fully
off grid, ground mounted solar PV facility plus 228 kW/912 energy
storage facility for a commercial customer in Mozambique (the
"Project"); and
-- put in place a US$750,000 working capital facility to
strengthen the balance sheet as the Company continues to deliver on
its strategy for the main Ncondezi Project over the next 9
months.
Key highlights
-- As announced on 5 April 2019 Ncondezi has identified
significant market demand for cost effective and reliable power in
the African Commercial & Industrial ("C&I") sector. Solar
and battery storage increasingly makes economic sense against
traditional power generation such as diesel generators
-- The Project has been entered into as the first interim
investment following the binding Term Sheet with GridX to form a JV
focused on building and operating captive solar and battery storage
solutions for the African C&I sector as announced on 5 April
2019
-- The Project is forecast to generate annual revenues of
U$198,000, through a 15 year fixed price offtake agreement
(escalated 2.0% annually)
-- The Project replaces existing generators and is expected to
provide cost savings to the offtaker of US$80,000 per year,
equivalent to a 29% cost reduction
-- Project commissioning targeted within 8 months with cashflow due to start in Q2 2020
-- Ncondezi will invest US$1.1m into the GridX SPV specifically to fully fund the Project
-- The Company has also put in place a working capital facility
for US$750,000 (the "Working Capital Facility"),for the main
Ncondezi Project which is provided by a company owned by a trust of
which newly appointed CEO, Hanno Pengilly, is a potential
beneficiary
-- The Working Capital Facility together with the Company's
existing cash resources are expected to cover corporate costs for
the Company to advance the main Ncondezi Project until the end of
Q2 2020 (assuming the Company's existing Shareholder Loan is
extended, restructured or converted into equity in advance of 30
November 2019, when it becomes due for repayment)
-- The Working Capital Facility allows the Company to advance
its strategy without having to raise equity at a time when the
Board considers the market price to materially undervalue the
Company
Ncondezi Chief Executive Officer, Hanno Pengilly, commented:
"Today's announcement marks the Company's strategic entry into the
disruptive C&I renewables and battery storage energy sector
with an investment in a construction ready project. The Project's
technical solution will provide 100% off grid energy supply and is
believed to be one of the first solar PV and battery storage
projects of this size in Mozambique. The move into the C&I
solar and battery storage sector represents a significant
opportunity for the Company to complement its existing large-scale
baseload power project and access near-term low-risk annuity income
streams which the Company believes has significant growth
potential.
The falling costs of solar and battery storage solutions
represents a significant opportunity for Africa where a large
portion of the regional economy is still heavily dependent on
expensive diesel generation or weak grid supply. According to the
International Energy Agency, this sector, together with other forms
of distributed energy generation such as residential solar
installations, has almost tripled in size since 2014 and is
forecast to represent almost half of global solar PV growth up to
2024, expanding as much as on shore wind over the same period. This
growth is being driven both by declining generation costs and
significant investor appetite for the sector.
This investment decision comes off the back of an extensive
technical and commercial due diligence and negotiation process, and
sets up the platform for further potential investments in the
future as Ncondezi demonstrates proof of concept to
shareholders.
Whilst the Ncondezi Project remains the Company's primary focus,
the investment in the C&I renewables and battery storage energy
sector offers a strategic advance into a new growth sector.
The Working Capital Facility ensures the Company is adequately
capitalised until the end of Q2 2020 (subject to the shareholder
loan extension). This puts the Company in a strong financial
position to deliver on its work programme over the next 3 to 9
months."
Background
On 5 April 2019, Ncondezi announced it had entered into a term
sheet with GridX, an African power developer, to enter into a Joint
Venture ("JV") and secure exclusivity and right of first refusal
over at least 50% of GridX's pipeline of C&I solar and battery
storage projects. As part of the announcement, the Company
announced that it had successfully completed a fundraising and
provisionally allocated US$1.1m for investment in the first C&I
project.
Overview of the Project
The Project has been developed by GridX and is based on
providing a 24 hour off grid energy solution. The Project includes
a 400 kWp fully offgrid ground mounted solar PV facility plus 228
kW/912 kWh battery energy storage facility. The solar facility has
been designed to produce 660,000 kWh per annum, providing over 90%
of the hotel's power needs. The solar energy generated will be
utilized to provide power for the lodge's daytime load and for
charging the battery pack. The remaining power (estimated at
<10% of overall needs) will be generated by the installation of
a 165 kVA diesel generator which is part of the Project design
envelope and as back up for periods of low solar power generation
or sustained high power consumption levels.
The Project will generate revenues through a 15 year US$
denominated off take contract and is targeted to generate revenues
of US$198,000 in its first 12 months following it becoming
operational. Revenues will be escalated by 2.0% annually
thereafter. The Project replaces existing generators and is
expected to provide the offtaker with cost savings of US$80,000 per
year, equivalent to a 29% cost reduction
The Project commissioning date is targeted within 8 months, with
cashflows due to start in Q2 2020.
GridX SPV
The GridX SPV has been setup specifically for the Project.
Shareholding of the GridX SPV is made up of A and B class shares.
GridX will hold 100% of the A class shares providing management and
profit share rights. Profit share rights are subject to specific
investment return hurdle rates being achieved by the GridX SPV.
Ncondezi will hold 100% of the B class shares which provide
management and economic rights. Through these holdings, Ncondezi
will have the right to appoint up to 4 directors and GridX 2
directors to the Board of the GridX SPV. GridX has the right to
acquire Ncondezi's interest in the GridX SPV for a fair market
value in the event of a default by Ncondezi.
GridX will provide Operations & Maintenance services for the
Project in accordance with market-related commercial terms. GridX
is also appointed to manage the GridX SPV for an annual fee of
approximately 1.5% of drawn project capital. The management
agreement can be terminated by the Company should GridX fail to
meet agreed KPI's. This structure is preferred as it minimises
potential overhead and day to day running costs of the Project to
Ncondezi.
GridX JV Next Steps
Following the investment in the Project, Ncondezi and GridX will
now focus on finalising the Joint Venture ("JV") as per the
announcement on 5 April 2019 when the Company entered into a
binding Term Sheet with GridX to form a JV focused on building and
operating captive solar and battery storage solutions for the
African C&I sector (the "Term Sheet").
Should the parties fail to finalise the definitive agreement for
the JV within the timescales set out in the announcement of 5 April
2019, the parties have the option to terminate the Term Sheet. In
this situation, GridX will be required to refund the Company
US$100,000 and will have a 12 month option from the date of the
start of Project commercial operations to purchase the Company's
shares in the Project at a price that returns to the Company its
original investment IRR.
Working Capital Facility
The Company has entered a term loan with Seritza Limited
("Seritza") for an unsecured working capital facility of US$750,000
for the continued development of the Ncondezi Project. The Working
Capital Facility will be available for drawdown from 1 January 2020
until 30 June 2020 at the Company's election and is repayable
within 24 months from first drawdown, unless there is an event of
default or the Company elects to prepay the facility. The Working
Capital Facility will attract a 10% annual interest charge, payable
at maturity or on repayment.
The Board considered a number of funding options and believes
the Working Capital Facility to be the most cost-efficient solution
to allow the Company to progress key development milestones on the
300MW Ncondezi Project over the next 3 to 9 months whilst
delivering its strategy in the C&I sector. The terms of the
Working Capital Facility also provide the Company with flexibility
to explore other funding options before and during the drawdown
period.
The Working Capital Facility together with its existing cash
resources will cover the full investment cost of the Project and
corporate costs for the continued development of the Ncondezi
Project until the end of Q2 2020, subject to the existing
Shareholder Loan being extended, restructured or converted into
equity.
The Shareholder Loan has $4.1m outstanding as at 23 September
2019 and matures on 30 November 2019. The Company has initiated
discussions with lenders on a potential extension or restructuring
and will provide a shareholder update in the coming weeks. The
Company has received positive feedback from a number of lenders and
has also received a number of refinancing proposals from third
parties, however these are currently at a preliminary stage and
there is no certainty that an extension or restructuring
contemplated by this announcement or any refinancing will
occur.
Seritza is a private company owned by a trust of which CEO,
Hanno Pengilly, is a potential beneficiary and so is a related
party.
Related Party Transaction
The Working Capital Facility constitutes a related party
transaction for the purposes of the AIM Rule 13. Accordingly the
Board, excluding Hanno Pengilly, being the Company's Independent
Directors in relation to the Working Capital Facility considers,
having consulted with Liberum Capital Limited, the Company's
Nominated Adviser, that the terms of the Working Capital Facility
are fair and reasonable insofar as the Company's shareholders are
concerned.
Enquiries
For further information please visit www.ncondezienergy.com or
contact:
Ncondezi Energy: Hanno Pengilly +27 (0) 71 362 3566
Liberum Capital Limited: Andrew Godber, Edward Thomas, +44 (0) 20 3100
NOMAD & Broker Kane Collings 2000
Novum Securities +44 (0) 20 7399
Limited Colin Rowbury 9427
Pimlico Advisory +44 (0) 777 56 55
Limited Elizabeth Johnson 927
Note:
The information contained within this announcement is deemed by
the Company to constitute inside information as stipulated under
the Market Abuse Regulation ("MAR"). Upon the publication of this
announcement via Regulatory Information Service ("RIS"), this
inside information is now considered to be in the public domain. If
you have any queries on this, then please contact Hanno Pengilly,
Chief Executive Officer of the Company (responsible for arranging
release of this announcement) on +27 (0) 71 362 3566.
Ncondezi owns 100% of the Ncondezi Project which is
strategically located in the power generating hub of the country,
the Tete Province in northern Mozambique. The Company is developing
an integrated thermal coal mine and power plant in phases of 300MW
up to 1,800MW. The first 300MW phase is targeting domestic
consumption in Mozambique using reinforced existing transmission
capacity to meet current demand.
This announcement includes statements that are, or may be deemed
to be, forward-looking statements. These forward-looking statements
can be identified by the use of forward-looking terminology,
including the terms anticipates, believes, estimates, expects,
intends, may, aim, plans, continue, assume, projects, should or
will, or, in each case, their negative or other variations or
comparable terminology, or by discussions of strategy, plans,
objectives, goals, future events or intentions. These
forward-looking statements include all matters that are not
historical facts. They appear in a number of places throughout this
announcement and include, but are not limited to, statements
regarding the Company's and/or Directors' intentions, beliefs or
current expectations concerning, amongst other things, the Company
or its group's results of operations, financial position,
prospects, growth, strategies and expectations for its business.
Any forward-looking statements in this announcement are subject to
risks relating to future events and other risks, uncertainties and
assumptions relating to the Company or its group's operations,
results of operations and growth strategy. Undue reliance should
not be placed on forward-looking statements because they involve
known and unknown risks, uncertainties and other factors that are
in many cases beyond the control of the Company. Specific
consideration should be given to the factors identified in this
announcement which could cause actual results to differ.
This information is provided by RNS, the news service of the
London Stock Exchange. RNS is approved by the Financial Conduct
Authority to act as a Primary Information Provider in the United
Kingdom. Terms and conditions relating to the use and distribution
of this information may apply. For further information, please
contact rns@lseg.com or visit www.rns.com.
END
UPDEAPEDASFNFEF
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October 23, 2019 05:00 ET (09:00 GMT)
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